Creative Savings Needed to Pay For Soaring College Costs

March 8, 2010 by vestmatch

Recently CNN reported that college costs are expected to increase 15%, and in some cases 30%, for the 2010-2011 school year.   This is on the heels of costs that increased 10% in 2009-2010.  This puts parents of younger children in a bind, and puts the future of the higher educational system as we know it at risk.  You can read the entire article here.

While increasing educational expenses may be interesting for many people, it is panic-inducing for parents of children who hope to go to college.  The impact of Use VestMatch to help Save for Collegethese skyrocketing costs is that parents need to expect to contribute astonishing amounts each year in order to pay for college.  Here’s an example.  If college costs continue to rise lower than expected, at a rate of 10%, annual school costs of a public college will go from about $25,000 per year to over $125,000 per year 18 years from now.  In order to reach that goal, parents would need to be socking away about $16,500 per year, assuming an annualized rate of return of 6%.   You say you have two kids?  Make that savings requirement $33,000 per year.  Saving for retirement, too?  Not anymore.

Of course, fiscal logic breaks down with these numbers.  The costs of college cannot continue to rise at the same speed as they have for the last decade, a rate that a several times the rate of inflation.  We’re not sure what the tipping point will be or what the exact outcome will be, but financially the idea of a four-year university where a student lives in or around campus cannot survive if costs continue to rise much faster than incomes or wealth rises.  As the idea of “saving for college” becomes less and less realistic, less people will save.  The fewer people save for college, the fewer children will be able to attend a four-year university as we know it.

However, until that happens, parents need to be saving as much as they can, but they also may be needing help from their own parents.  After all, grandparents often give children financial gifts on birthdays and holidays.  Why not have those gifts be placed directly into a 529 Plan or another account you are using to save for college.  And you can use VestMatch to make , link it to your financial account you use for college savings, and then invite others to join in the effort.  Who couldn’t use a little help?  Or a lot?

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Micro-Philanthropy Using VestMatch

February 26, 2010 by vestmatch

You’ve heard of micro-finance, but micro-philanthropy?  In today’s San Francisco Chronicle an article featured an organization called the Secret Society for Creative Philanthropy.  The intent of this organization is to give small amounts of money to people with the intention of having those people do good things for strangers.  Sort of a “pay it forward” idea, with the hope that if someone helps you out you are more likely to help someone else out.

Several examples of how people used the funds were included in the article, and vestmatch.comhere are a few.  One man took the $100 he was given by the organization and bought umbrellas to give away on Market Street in San Francisco on a stormy day.  Another stood by a subway station with a sign offering anyone $1 if they gave it to someone else.  Another person gave a $100 tip to a cab driver “just to see what he would do.”

You could do the same sort of thing in your area, and if you use VestMatch to help you administer and communicate it gets easier.  You could use VestMatch to gather contributions, you could use it to communicate with others in your giving group for ideas on how to spend the funds, and you could upload pictures and stories of how the funds were used for everyone to see.  You could even mark your VestMatch plan as a “public” plan meaning everyone who visits vestmatch.com would be able to see the plan, it’s mission and the success you’ve had.

How would you spend $100 if you had to use it for strangers?

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Create Your Own Matched Savings Account

February 12, 2010 by vestmatch

A friend of mine has adult children in their early 20’s.  Over the last year or so, he has been concerned about their lack of interest in saving or investing for the future.  It seems as if they live paycheck to paycheck spending everything they make (and then some).   He decided he wanted to have some way to give them an incentive to save, like for every month they add $100 to a savings account, he’d put in $50.   But there wasn’t really an easy way for him to make this happen.  He didn’t want to be co-account-holders, since he wanted this to be considered a gift.  VestMatch was the answer.

With VestMatch, it’s easy to set up a Matched Savings program that has maximum flexibility for you to set whatever parameters you want.  There are a few steps.  First, have the recipient set up the account at a bank or brokerage firm.  (VestMatch can work with any account anywhere, so go wherever is best foVestMatch Iconr you.)  Second, he or she can go to VestMatch and click on Create A Plan.   The recipient creates a “plan” which could be a description of what he or she is saving for.   The plan can then be linked to the account at the bank or brokerage firm that was set up.  Finally, by going to “Invite Plan Partners”, you can be sent an e-mail inviting you to join the plan.   That’s all there is to it.

At this point, everyone who is part of this plan can see important information, like account balances that are updated each night.  Now as transactions are made to that financial account, the recipient will see the transactions and indicate that they are OK.  If there are deposits, they can show who made the deposits.  This information is then shown to all plan partners.  So you can check in each month to the plan through VestMatch, see the account balance, see the deposits for the month and then decide to make your matching deposit.   You can have your match be anything you like.  VestMatch allows you to set the rules.

When you are ready to make your matching deposit, the most cost-efficient manner is to mail a check to the bank or brokerage firm for the benefit of the recipient with their account number indicated.  However, you can also give directly through VestMatch, and you’ll see the “Contribute Now” button.  Please be aware, though, there will be a 3.5% fee deducted from your contribution that will go to cover the expenses of the credit card and processor.  VestMatch doesn’t make money from this fee, so we are indifferent whether you use the convenience of the Contribute Now button or mail your check directly.

My friend is now the happy partner of two matched savings plans for his children.  You can be too.

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Become of Fan of VestMatch on Facebook

January 25, 2010 by vestmatch

VestMatch has set up its fan page on Facebook, and you can become a fan.   Now, we won’t inundate you with unimportant information, but we will post links to blog posts and occasionally other news on VestMatch that we think may be of interest.

Best of all, you can either add to current discussion items or start your own discussion on a topic that you think is important. The discussions are in the “Boxes” tab of the VestMatch page, or can be found here.

Check out the VestMatch page here, and add to the discussion here.

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New: Collaborate Savings Program For Banks & Credit Unions

January 7, 2010 by vestmatch

Today we are announcing the launch of a fast-track white-label Collaborative Savings tool for banks and credit unions.  By private labeling of VestMatch’s web-based social savings platform, a bank or credit union can expand customer retention efforts and be introduced to highly-qualified prospects quickly and effectively.

We know Collaborative Savings is growing rapidly because we see it every day.  Parents are trying to set up matched savings programs with their kids all the time and there hasn’t been an effective way to do that in the past.  Parents and grandparents often join together to save for college, but there hasn’t been visibility for everyone.   VestMatch has changed that with its launch in 2009, and now banks and credit unions can offer this service with their own brand, look and feel and usually have it available to their customers within four weeks.

Of course, the key benefit to users of VestMatch is transparency.  When someone sets up a plan and invites others to help them, they connect that plan to an account at the bank or credit union.  Anyone who is a partner saving toward the plan’s goal can see account balance, contribution history and transactions, as well as make contributions. This transparency builds trust between plan members, since they know how the money is being saved and used for the right purpose.  Because it also comes with a private social network, plan partners also can send private or group messages to each other, post photos or videos and keep others informed about the goal and ultimately how the funds get used.

The key benefits for banks or credit unions using VestMatch’s Collaborative Savings tool are relationship expansion, customer retention and new customer acquisition.  Since users invite others to join with them to save for a goal, the people who are invited to join are likely not to be customers of the bank or credit union, but now they become a highly-qualified prospect.

We can deliver a private-label tool within just a few weeks, and we do it with minimal impact on bank technology.  We create a separate site for the bank, and interact with the bank’s systems in just a few ways:  to handle contributions and to update balances nightly.   If required, we can use third parties to do one or both of these functions as well.  The marketing team at the bank or credit union work with us to design the home page copy, look and feel, and we incorporate that through the site.   We then provide ongoing reporting to the marketing team on users, assets, contributions, etc.  The marketing team can work with us to deliver cross-promotional messages to users either through the tool’s messaging service or as a separate e-mail marketing campaign.

If you are interested in finding out more, just drop Matt Sadler a line at matt@vestmatch.com.

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Yodlee Features VestMatch in Press Release

December 18, 2009 by vestmatch

Yesterday, Yodlee issued a press release “Yodlee’s Guide To Financial Success in 2010″.   VestMatch was among the four firms featured.  Here’s what Yodlee said:

Get by with a little help from your friends – Collaborative investing means individuals, families and groups have a way to save together to meet a common financial goal. VestMatch (vestmatch.com) provides online tools to reach these goals faster and more efficiently. In minutes VestMatch’s tools create a financial plan and invite others to help reach that goal – whether with close friends or philanthropic strangers from around the globe.

Read the whole press release here.

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Maintenance on VestMatch Site

October 5, 2009 by vestmatch

VestMatch is performing maintenance on its site on Monday, October 5, 2009 to continue to improve site performance. We are sorry for any issues this may cause, and will have the site online as quickly as possible. Thank you for your understanding.

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Improve Your Rate of Return Today

April 7, 2009 by vestmatch

If you have a college savings plan, perhaps even a 529 plan, for longer than two years, you know that the markets have casued quite a bit of damage to your plan.  Since the fall of 2007, many of the selections available to you in a 529 plan are down more than 20%.  If you invested your savings for college in a traditional equity fund, your losses may be 40% or even 50%.   Unlike many other goals where there is flexibility in timing and costs, for college the timing is pretty set and the costs are not totally in your control, unless you consider a less expensive school.

Now what if I told you that you could have a rate of return of 30% or 40% over the next year?  And you could be invested in the lowest-risk asset you can find, US Treasury bills.  Would you believe me?  It’s possible, through collaboration.

Collaboration, having others provide a helping hand in reaching your goal, can turn this disaster around much faster than you could do it on your own.   Let’s walk through an example:

Jim and Marge have a 10 year old son and they have $5,000 in a 529 plan today, though it had been as high as $9,500.  While they are unlikely to save enough to pay in full for school in 8 years, they want to be as prepared as possible.  They decide they can save $500 per month in their 529 education plan.  In 8 years, they would have contributed $48,000 more to their plan ($500 x 12 months x 8 years).

Alternatively, Jim and Marge set up a VestMatch plan and link their 529 savings plan to it.  Using VestMatch, they invite Jim’s parents, Marge’s parents, and their siblings.  Their parents each sign up to contribute $100 per month, and their siblings in total add another $100 per month.  Jim and Marge still put in their $500 per month.  Note that while Jim and Marge put in $500, just like in the first example, there is actually $800 going in each month — or 40% more than what Jim and Marge invest.  This is the best return on those dollars they will ever find.  In 8 years, they will have added $76,800 to their college savings.

This “rate of return” is available not just for people saving for college, but also for people who are saving for any financial goal — through collaboration.  And VestMatch makes it easy.

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VestMatch 101: Parents Saving for College

March 12, 2009 by vestmatch

Have you done the math?  If you haven’t, check out www.savingforcollege.com for a simple calculator for what to expect for college expenses.  To put a newborn through four years of college beginning 18 years from now, you need to save $312,000.  Per kid.  To reach that, at a 4% return on investment, you would need to contribute $837 per month.  Per kid.  And that doesn’t take into account the possibility of a devastating loss of account value due to a declining market, like many have seen over the past 18 months.

Let me go out on a limb here.  Most parents of newborns are not in jobs where they can easily set aside $837 per month to put into an account earmarked for education.  They can scrimp and save, but this is, for most people, unrealistic.  What are the options for parents?

Option 1) Just do it — OK, this is the “best” option, but it is unlikely that this kind of extra money falls to the bottom in the average household.

Option 2) Just ignore it — Perhaps the most common situation.  Maybe we’ll put something aside, maybe not, but we’ll cross that bridge when we get there.  For some people, this works out.  For others, it leaves either parents or children burdened with a heavy loan debt.

Option 3) Just ask for help — Parents of newborns usually have parents (grandparents) who are alive and who are willing to help if they were asked.  Parents don’t want to ask for lots of reasons, and grandparents don’t always want to “force themselves” into situations where they may not be welcomed — and who wants to have a money conversation with their parents?  But we know through research that two-thirds of grandparents would help if asked.

VestMatch comes in at Option 3.  Parents can set up a VestMatch plan in just a few clicks, open an account at any bank or brokerage firm, even open a 529 Plan account, and then link that account to their VestMatch plan.  They then can invite the grandparents (and uncles, aunts, cousins, godparents, etc.), by way of e-mail, to “join” their plan.  At that point, everybody who is part of the plan can see how much is in the account, and they can decide to contribute.  Everybody can also see who is contributing to the account and, soon, how that account is invested.  This way everyone knows the status and can feels confident about contributing.

While your “Plan Partners”, those people who you invited, can contribute to your plan either every once in a while or on a regular monthly or quarterly basis.  They can contribute conveniently through VestMatch, but there is a fee that VestMatch charges to offset the charges that it gets from banks for moving the money.  A less convenient but more cost-conscious way is to either contribute by way of check into the bank or brokerage account set up for education, or set up an automated funds transfer from their checking account into the bank or brokerage account.  Your bank or brokerage firm would have all the paperwork needed to make that happen.

So now the parents are contributing $300 per month, and each set of grandparents decides to contribute $200 per month.  In addition, the godparents and the uncle contribute an extra $100 every birthday.  Are the parents at $837 per month?  Not quite — but they are a little $715 per month, and are well on their way.   Perhaps the parents can think of other friends or relatives who may be willing to kick in $10 or $25 per month to close that gap.

Do you see how VestMatch works?  It works because of the power in numbers.  If you have a goal, and you can bring others to help you reach your goal, you can.

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